Lawyers of the largest class action lawsuit in Australia told the High Court on Tuesday that ANZ bank charged customers with excessive bank fees for overdrawing their accounts.

Justin Gleeson, who represents 38,000 ANZ bank customers, sought the reversal of a Federal Court judgment that defined which bank penalties are considered excessive. The class action has extended to 170,000 customers of ANZ, Commonwealth Bank of Australia, National Australia Bank, St George, Citibank, Bankwest and Bank SA. The customers claim over $220 million excessive bank fees.

Mr Gleeson said the overlimit fees collected by the banks are not service fees but penalties which enriched the lenders. He called the $29.95 fee collected by ANZ as unjust enrichment because it has recovered cost with the 4 per cent interest rate on the amount overdrawn. He pointed out the bank did not provide a service but punished the borrowers for overdrawing from their accounts.

"This is really a case where the bank has been receiving more than the full compensation . . . the purpose of the fee is to keep the account within the agreed limit," The Australian quoted the lawyer.

Mr Gleeson said ANZ customers who have overdrawn their accounts should only be charged a $45 dishonour fee of $29.90 honour fee, and have electronic access to their account terminated, not be charged another 4 per cent for the amount overdrawn.

Andrew Watson, another lawyer from Maurice Blackburn, said that while the income that banks earn from households in fees has been declining to just about one-third of the amount which reached $1.3 billion a few years back, the fees are still too high.

IMF Australia, which bankrolled the class action suit, said it will cover the cost if the bank customers lose the High Court case, but collect 25 per cent of the $220 million charge if it wins the case.

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